EU must boost clean tech funds to counter US, Von der Leyen says

The head of the European Union’s executive arm said the bloc should pass a new law to fast-track investments in clean tech and boost funding for the energy transition in response to a US climate law that it fears unfairly subsidises American companies.

“To keep European industry attractive, there is a need to be competitive with offers and incentives that are currently available outside the European Union,” Ursula von der Leyen, president of the European Commission, said in a speech at the World Economic Forum in Davos on Tuesday. “To avoid fragmenting of the single market and to support the clean tech transition across the whole union, we must also step up EU funding.”

She said that as part of a new Green Deal Industrial Plan, the bloc should temporarily adapt its state aid rules to make them faster and simpler from calculations to approvals, adding that tax-break models are an option.

Her plan opens the door to funding the production of specific clean tech projects with a “Net-Zero Industry Act”, similar to the EU’s Chips Act last year, as well as simplifying and fast-tracking permits. She also touted her plan for a sovereignty fund, which is not expected until later this year.

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EU leaders are concerned the US Inflation Reduction Act, which includes incentives for renewable energy companies, discriminates against European firms and could lure investment to the US. They will meet in Brussels next month to discuss a response, with some pushing for a “Made in Europe” approach to help bolster domestic companies.

Von der Leyen also called for a more robust response to Chinese efforts on boosting clean tech innovation and manufacturing, and measures including heavy domestic subsidies and restricting market access for EU firms.

“We still need to work and trade with China, especially when it comes to this transition,” von der Leyen noted, saying that “we need to refocus our approach on de-risking rather than decoupling.” She added: “We will not hesitate to open investigations if we consider that our procurement, or other markets, are being distorted by such subsidies.”

EU officials have become increasingly sceptical about the US offering any major concessions over its climate law to benefit European companies. Some still hope for changes in March that could allow raw materials for batteries to qualify under the US law, but officials have acknowledged that the amount of subsidies will be difficult to counter whatever changes are made.

European capitals and commissioners are debating the EU’s domestic response. Internal Market Commissioner Thierry Breton has been campaigning in European capitals to increase the amount of state aid allowed to help companies with their operating costs and to invest in the production of clean tech industries. He is also pushing a European sovereignty fund that would allow the bloc to put money into crucial sectors when needed. – Bloomberg